Three Labour-supporting peers face being suspended from the Lords after an investigation into claims that they were expenses cheats.

Two are understood to have been ordered to pay back £154,000 in expenses between them, while the third has already returned £38,000.

The penalties follow an inquiry into the conduct of Baroness Uddin, Britain’s first female Muslim peer, steel tycoon Lord Paul, a close friend of Gordon Brown, and fellow millionaire Lord Bhatia, who has given money to Labour.

All three were accused of pretending their main homes were away
from London, allowing them to falsely claim the £174 overnight grant
for peers who live outside the capital.

The Mail on Sunday has
been told that Baroness Uddin, 51, has been told to pay back £127,000
and faces being suspended from the Lords for a year. Indian-born Lord
Bhatia, who was awarded a peerage by Tony Blair, must return £27,000
and faces a six-month expulsion. Lord Paul, who paid back £38,000,
could also be banned for up to six months.

The Mail on Sunday
understands that Lord Bhatia and Lord Paul will make formal apologies
in the Lords. Baroness Uddin has always denied any wrongdoing.

Peers
who state their main homes are outside the M25 motorway are entitled to
claim the ‘daily accommodation allowance’ to help them attend their
duties at the House of Lords.

Baroness Uddin was accused of
claiming £100,000 in overnight expenses by designating a flat in
Maidstone, Kent, as her main home while allegedly living in a
three-storey home just four miles from Westminster in Wapping, East
London.

Lord Paul (left), who paid back £38,000, could be banned for six months and Lord Bhatia (right), who was awarded a peerage by Tony Blair, must return £27,000 and faces a six-month expulsion

Neighbours claimed they had never seen her at the
Maidstone address and Baroness Uddin was also quoted as describing the
East End as ‘my home for over 30 years’.

But she strongly denied allegations of abuse, claiming the Wapping address was rented while she owned the Kent property.

Lord
Paul, one of Britain’s richest men, came under fire for claiming
£38,000 in overnight expenses after registering as his main home a flat
in Oxfordshire that he later admitted he had never slept in.

The peer, founder of the giant steel and engineering firm Caparo, paid back the money in March.

Meanwhile,
Lord Bhatia faced allegations he claimed over £20,000 in expenses by
pretending to live outside the capital in a small, two-bedroom flat in
Reigate occupied by his brother when he actually lived in a
£1.5 million home in Hampton, South-West London.

Challenged
over the claims the peer, who insisted he complied with the rules,
reportedly failed to remember the address of the Reigate apartment.

Lord
Bhatia was last year forced to quit Labour’s flagship City Academies
programme after investigators found that £60,000 of public money ended
up in the coffers of one of his charities and a further £10,000 was
blown on a trip to Dubai. The peer denied the money was misspent.

Earlier
this year, there was uproar when a rule change in the Lords’
accommodation procedures meant peers accused of milking expenses would
escape criminal charges. None of the three peers was available for
comment last night.